Rick Rubin & Intuition-Driven Building

`1:31:37`

And so, I would not want to run a grocery store. I don't want to run a 2% or 1% margin business. And what's always blown me away is how many companies in Silicon Valley who are in the software business lose gobs and gobs of money. It's like the most unbelievable thing for an industry like Silicon Valley to lose so much money on the highest margin product in history, software, with no costs, nothing. There's nothing to software. It's bits. There are some data costs, but it's called basically zero, all things considered. And there are still companies that are blowing billions, have never made a penny. They're big companies that you know of, just blowing money. It just blows my mind. It seems so incredibly irresponsible to me, but that's just me coming from a

`1:32:23`

small business entrepreneur mindset, I suppose. But I just don't get that world. — So the blubber, if we're going to use... — The blubber, let's get back to the blubber. — The blubber helps you stay in business. — Yeah, it's fat reserves. Like, you should have those. It's cool to have 6% body fat, but it's not a good thing to live that way for a long period of time. You need to have some... If you're stuck out in the wilderness for a while, you need to burn something, right? — You're dead. — So, we've lived through dot-com crash, 2008 stuff, COVID. We have fat on the bone. I think it's very important to have that and not just be at the bone. The other thing is that because we're an LLC, at the end of the year, whatever money is left over goes to the members, the unit holders, which are me, David, and then we have two other people on the cap table.

`1:33:11`

And then also, 10% of our profits go to our employees every year. And it's based on seniority. Or actually, that's the wrong... It's based on longevity, not seniority. The two aren't the same thing. However long you've been here. So every month you've been... You basically accrue units, up to ten years' worth of units. At that point, you've maxed out your units, and we distribute profits based on that. So, it's not based on which role you're in. It's not based on the salary or your title. If you've been here for ten years and you're a principal software engineer making hundreds of thousands of dollars a year, your bonus, your profit-sharing bonus, is the same as someone on customer support who's maybe making 90 grand or a hundred grand, who's been here for 10 years.

`1:33:56`

So, all that money goes to real people. It's real money, it's real cash. No options, no RSUs, no stock, any of that BS. I find almost all of that to be pretty much BS, unless you're a really well- established public company. Our bonuses are based on profits. We've been profitable for 27 years, and they're distributed every year, and they're meaningful. I looked this up before the show. About 20 out of the 62 people last year, or 2024, because we haven't closed the final books on 2025 yet, there were six-figure bonuses, and this is year after year after year after year. It's real cash. That's the beauty of a simple business, a simple cap table, an LLC, and sharing real profits. There are plenty of people in

`1:34:43`

our industry, plenty of our competitors, which I'm not going to name, that hire a lot of people and promise them a lot of stock, and you look at the chart, and it's down and to the right. And I feel bad for those people because they were promised something they'll never, ever get. So getting back to real, I want to pay people with real money they can actually put as a down payment for a home, pay for the college education for their kids, go on vacation, sock it away, whatever they want to do. This is real cash on an annual basis, and this is all part of a good business with sound fundamentals that has high margins and high profits and is an LLC, so we can distribute it every year. We have to, in fact, you can't leave any money in an LLC. You can, but you've got to pay taxes. Anyway... — I know. — You know what I... Just so, there's some pedantic person watching, you know.